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Review of the National Carbon Offset Standardand Carbon Neutral Program

Consultation paper

March 2015

© Commonwealth of Australia, 2015.

Review of the National Carbon Offset Standard and Carbon Neutral Program—Consultation Paper March 2015 is licensed by the Commonwealth of Australia for use under a Creative Commons By Attribution 3.0 Australia licence with the exception of the Coat of Arms of the Commonwealth of Australia, the logo of the agency responsible for publishing the report, content supplied by third parties, and any images depicting people. For licence conditions see: http:// creativecommons.org/licenses/by/3.0/au/

This report should be attributed as ‘Review of the National Carbon Offset Standard and Carbon Neutral Program— Consultion Paper February 2015, Commonwealth of Australia 2015’.

The Commonwealth of Australia has made all reasonable efforts to identify content supplied by third parties using the following format ‘© Copyright, [name of third party] ’.

Disclaimer The views and opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Australian Government or the Minister for the Environment.

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CONTENTS

INFORMATION FOR RESPONDENTS 4

Key dates 4

Submission Guidelines 4

Introduction 5

Scope and Structure of the Review 5

Background on the National Carbon Offset Standard and Carbon Neutral Program 6

1. Objectives of the NCOS and the Carbon Neutral Program 7

1.1 Alignment with Australia’s climate policy 7

2. Role and value of the NCOS and Carbon Neutral Program in supporting the voluntary carbon market 8

2.1 Carbon footprint calculation standards 8

2.2 Establishing the eligible offsets list 9

3. Administration of the Carbon Neutral Program 11

3.1 Administrative responsibility for the Carbon Neutral Program 11

3.2 Financial aspects of the Carbon Neutral Program 13

3.3 Improving the Carbon Neutral Program Guidelines 14

3.4 The NCOS Carbon Neutral Program Consumer Trade Mark 15

4. Streamlining and Improving Rules and Procedures 16

4.1 Threshold for small emissions sources 16

4.2 Calculating and reporting Scope 3 emissions 17

4.3 Calculating emissions from an event 18

4.4 Meeting the evolving expectations of business and the community 19

4.4.1 Avoiding potential for double counting of emission reductions 19

4.4.2 Partial certification under the Program 19

4.4.3 Recognising offset co-benefits under the Program 20

Glossary 22

Appendix A – Consultation Questions 24

Appendix B – National Carbon Offset Standard (Version 2) 26

Appendix C – Carbon Neutral Program Stages 50

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INFORMATION FOR RESPONDENTS

This paper forms the basis for consultation on the 2015 Review of the National Carbon Offset Standard (NCOS) and the Carbon Neutral Program. Information gained through this public consultation process will be used to revise the NCOS and the Carbon Neutral Program Guidelines.

Key dates

December 2014 Terms of Reference for the Review Published

23 March 2015Consultation paper available on the Australian Government Department of the Environment website environment.gov.au

22 April 2015 Submissions on the consultation paper close

Submission Guidelines

These guidelines outline the requirements for submissions on this consultation paper:

1. Submissions are invited from all interested member of the public, community organisations and businesses;

2. Where possible submissions should be lodged electronically, preferably in Microsoft Word, PDF or other text based formats, via the email address – [email protected]. Alternatively, submissions may be sent to the postal address below to arrive by the due date;

ERF Governance and Carbon Neutral Program ERF DivisionDepartment of the Environment GPO Box 787 CANBERRA ACT 2601

3. Submissions will generally not be treated as confidential and will be made publicly available unless the author requests otherwise. If a submission (or extracts of a submission) is to be kept confidential, please indicate this in the submission; and

4. All submissions are due by 5pm AEDT on 22 April 2015. The Government may not be able to consider late submissions.

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INTRODUCTION

The Australian Government National Carbon Offset Standard (NCOS) and the Carbon Neutral Program together provide a framework for businesses and other organisations to offer carbon neutral products and services.

Since the introduction of the NCOS and Carbon Neutral Program in 2010, there have been important changes to Australia’s climate change policy. Most notably, the Government has repealed the carbon tax and replaced it with the Emissions Reduction Fund (ERF). The ERF provides the impetus for businesses and the community to reduce Australia’s greenhouse gas emissions.

In the ERF White Paper, the Government said that it would conduct a review of the NCOS. The review provides an opportunity to ensure the NCOS and Carbon Neutral Program settings align with broader Government policy, and that they continue to meet consumer and business needs efficiently and effectively.

Scope and Structure of the Review

This consultation paper has been designed to frame issues, outline key considerations and pose questions for feedback. Reflecting the Terms of Reference for the Review, this paper is structured in four key parts:

1. Objectives of the NCOS and Carbon Neutral Program: Reviews the overarching objectives of the NCOS and the Carbon Neutral Program to ensure they complement broader Government policy.

2. Role and value of the NCOS and Carbon Neutral Program: Reviews the role of the NCOS and the Carbon Neutral Program in supporting the voluntary carbon market.

3. Administration of the Carbon Neutral Program: Considers whether the current administration of the Carbon Neutral Program provides an effective and efficient mechanism for certification of carbon neutral claims.

4. Streamlining and improving rules and procedures: Discusses specific options for streamlining the NCOS and the Carbon Neutral Program to ensure they are meeting their objectives.

Reducing red tape is a key part of the Government’s plan to build a strong and prosperous economy. The Government has committed to identifying opportunities to reduce the net impact of regulation on individuals, business and not-for-profit organisations by $1 billion a year. This review provides an opportunity to consider the operation of the NCOS and the Carbon Neutral Program in light of this agenda.

Business and community groups are encouraged to provide input on all the issues covered in the consultation paper. A list of the consultation questions is compiled in Appendix A.

The current iteration of the NCOS (version 2) is included at Appendix B for reference.

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BACKGROUND ON THE NATIONAL CARBON OFFSET STANDARD AND CARBON NEUTRAL PROGRAM

The NCOS and Carbon Neutral Program are a partnership between the Australian Government and industry. The Australian Government introduced the NCOS in 2010 following calls from business and other organisations for a Government endorsed carbon neutrality standard and a Government administered carbon neutral program to give consumers confidence in carbon neutral claims.

The NCOS provides a benchmark for claims of carbon neutrality and the credibility of carbon offsets available to the voluntary carbon market. The NCOS does this through providing guidance on what are genuine offset units and by setting out minimum requirements for calculating, auditing and offsetting an organisation’s carbon footprint.

The Carbon Neutral Program allows the operations of an organisation, products, services or events in Australia to be certified as carbon neutral in accordance with the NCOS. The requirements for certification are set out in the Carbon Neutral Program Guidelines, which specify that in order to be carbon neutral an organisation must:

measure its carbon footprint;

monitor and reduce emissions (to the extent possible); and

purchase and cancel sufficient eligible carbon offset units to offset the remaining emissions associated with the claim.

Once certified, an organisation can use the NCOS Carbon Neutral Certified logo under license from the Government for promotional and marketing purposes. This logo indicates to the public that the organisation, product or event has zero net emissions.

Over 30 organisations are now certified through the Carbon Neutral Program and many others use the NCOS independently to calculate their carbon footprint and offset their emissions. The participants cover a range of sectors including the finance sector, manufacturing, small business, local councils and airlines. The organisations participating in the NCOS Carbon Neutral Program continue to take the lead in Australia’s voluntary carbon sector and demonstrate their commitment to achieving a low carbon future.

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1. OBJECTIVES OF THE NCOS AND THE CARBON NEUTRAL PROGRAM

1.1 Alignment with Australia’s climate policy

The ERF is the centre-piece of the Government's climate change strategy. The ERF will support Australian businesses and households to take practical, direct action to reduce greenhouse gas emissions. The objective of the ERF is to help achieve Australia’s emissions reduction target of five per cent below 2000 levels by 2020.

The ERF will be built around a streamlined process to purchase emissions reductions at the lowest cost across the economy. Emission reductions will be verified and credited by the Clean Energy Regulator according to approved methods. These approved methods will ensure that emission reductions are genuine, that is, they are both real and additional.

The Clean Energy Regulator will conduct auctions to purchase emissions reductions at the lowest available cost. The auctions will commence in April 2015. As outlined in the ERF White Paper, the ERF will include a safeguard mechanism which will help ensure that emissions reductions paid for by the ERF are not displaced by a significant rise in emissions elsewhere in the economy.

The ERF will support the voluntary carbon market

In the ERF White Paper, the Government said that it would ensure that businesses can sell Australian Carbon Credit Units (ACCUs) generated under the ERF into the voluntary carbon market. This commitment supports the voluntary market by ensuring that it has a supply of credible carbon units.

Furthermore, the Government also said it will cancel Kyoto units where Australian Carbon Credit Units are retired by participants in the NCOS Carbon Neutral Program. This allows all offsets to be additional to Australia’s national emissions target. Consumers of carbon neutral products can therefore be confident that their purchases have led to additional emission reductions.

To reflect the repeal of the carbon tax, and ensure alignment with current policy, all reference to the carbon price mechanism will be removed from the NCOS.

A strong voluntary carbon market will complement the ERF

A strong voluntary carbon market complements the ERF by providing an alternate market for businesses to sell credited abatement in the form of ACCUs.

It will also be possible for overseas buyers to own ACCUs, creating further demand for units. However, the Australian Government will not export credits into foreign registries for at least three years as the export of credits will make it harder for Australia to meet its five per cent emissions reduction target. Future arrangements concerning the export of ACCUs will be examined as part of the 2015 review of the ERF.

Feedback is sought on whether the objective of the NCOS is in line with current Government policy and whether the NCOS continues to meet the needs of business, local government and the broader community. The current NCOS objective is set out as follows:

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The NCOS is designed to ensure that consumers have confidence in the voluntary carbon offset market and the integrity of the carbon offset and carbon neutral products they purchase. It provides guidance to businesses who wish to make their organisation carbon neutral or develop carbon neutral products in a way that achieves emissions reductions that are beyond those achieved under domestic mitigation policies and Australia’s national emissions reduction targets.

Consultation Question

1.1 Can you suggest changes to the objective of the NCOS to reflect the current needs of business and the broader community?

2. ROLE AND VALUE OF THE NCOS AND CARBON NEUTRAL PROGRAM IN SUPPORTING THE VOLUNTARY CARBON MARKET

The ERF White Paper recognised that the NCOS has been effective in supporting the growth of a strong voluntary carbon market in Australia. During consultations on the ERF, business and some other organisations suggested that the Government should continue to support the voluntary carbon market and streamline arrangements underpinning the NCOS.

2.1 Carbon footprint calculation standards

There are several international standards which, like the NCOS, set out minimum standards for measuring and communicating carbon footprints or achieving carbon neutrality. The NCOS draws on aspects of these international standards in setting out Australia’s requirements for carbon accounting and reporting.

Since 2010, some of these international standards have broadened their scope and new standards have gained broader acceptance. Recent developments in carbon accounting standards include:

the 2014 update to the British Standards Institute’s PAS 2060: Specification for the demonstration of carbon neutrality; and

the introduction of the World Resources Institute’s GHG Protocol Scope 2 Guidance (2015) which standardises how corporations measure emissions from purchased or acquired electricity, steam, heat, and cooling.

Although the NCOS is a voluntary standard, business or other organisations that choose to participate still bear the costs of complying with the standard. Maintaining the Standard, including through the current review, has resource implications for the Government.

The Government’s Industry Innovation and Competitiveness Agenda has made the commitment that all Australian Government standards would be assessed to determine whether unique Australian standards or risk assessments are needed, or whether trusted international standards could be accepted or adopted in Australia.

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Some businesses with an interest in carbon neutrality operate in a number of countries and may find it more efficient to use an international standard with broad application rather than the NCOS.

This review of the NCOS will test whether any other relevant international standard could be used as it is or adapted to serve the same function as the NCOS.

Possible options include:

Adopting one of the international standards for carbon footprint measurement (such as Australian Standard ISO 14064 series or the World Resources Institute’s Greenhouse Gas Protocol) to replace the carbon accounting elements of the NCOS.

Discontinuing the NCOS and adopting the United Kingdom’s PAS 2060 instead. PAS 2060 is a purpose designed carbon neutral standard published by the British Standards Institute which includes guidance on measurement, reporting and verification of carbon neutral claims.

Unlike the NCOS, the international standards mentioned above do not include an eligible offsets list. Accordingly, if any of these standards were used in place of NCOS, consideration would need to be given as to whether it is necessary to stipulate the eligible carbon units and, if so, how this could be done. Consumers of carbon neutral products or services are likely to want some assurance that the carbon units used for offsets are robust. Business and other organisations that generate ACCUs may also have an interest in ensuring that a carbon neutrality standard used in Australia creates a source of demand for the abatement that they generate by recognizing ACCUs as eligible abatement.

Options for specifying eligible units include maintaining an eligible offsets list in the Carbon Neutral Program guidelines or recognising an alternative voluntary market mechanism such as the International Carbon Reduction and Offset Alliance (ICROA) offset list (see section 2.2 below).

Consultation Questions

2.1 (a) What role does an Australian Government developed standard have in supporting consumer confidence in the local voluntary carbon market?

2.1 (b) Could the NCOS be replaced by an existing standard while still ensuring consumer confidence? Views are sought on which would be the most appropriate standard and why?

2.2 Establishing the eligible offsets list

To achieve carbon neutral status, businesses must reduce their emissions and offset their remaining carbon footprint using credits from certified emissions reduction projects. It is important that consumers have confidence that these offset units have led to real and additional reductions in greenhouse gas emissions.

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A key function of the NCOS is to identify offset integrity principles and eligible offset units (see part 3 of the NCOS). Eligible offset units under the NCOS include Australian Government units and some international units.

Australian Government Units

Australian Carbon Credit Units (ACCUs) are generated by eligible offset projects approved by the Clean Energy Regulator. These units are eligible under the ERF and can also be cancelled voluntarily in the context of the NCOS carbon neutral certification.

As discussed above, to ensure that units retired by participants in the Carbon Neutral Program are additional to Australia’s international target commitments, the ERF White Paper confirmed that the Government would cancel a Kyoto unit for each ACCUs retired under the Carbon Neutral Program.

International Units

International units which meet the offset integrity principles are also outlined in section 3.2 of the NCOS. New types of offset units may be added to the NCOS through amendment of the offset list.

New Offset Types

Feedback is sought on the NCOS eligible offsets list and in particular whether any existing units should be removed or whether any new types of offset units should be added to the eligible offset list.

Business and community groups have proposed that the following offset unit types be accepted for use under the NCOS:

The Plan Vivo Standard for Community Payments for Ecosystem Services is based on 20 years of experience in connecting rural communities to the voluntary carbon market and aims to provide a robust and pragmatic framework for those communities to generate certified carbon credits.

New Zealand Units (NZUs) are the primary domestic emission units of the New Zealand emissions trading scheme and are issued by the New Zealand Government.

Aligning with an existing internationally endorsed list of offset standards

Some businesses and community groups have suggested that the NCOS could be aligned with the International Carbon Reduction and Offset Alliance (ICROA) endorsed list of international units. Aligning with the ICROA list would mean that when new offset units are approved by that organisation they would also be eligible under the NCOS.

This option has the benefit of ensuring that the approved offset list is up to date with international developments, and would provide proponents of new voluntary market offsets standards a pathway to having their units recognized under the NCOS outside of the periodic review process.

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Mutual-recognition of international carbon neutral certification programs

It has been proposed that mutual-recognition of equivalent schemes be considered as part of this review. This would apply where an organisation has received certification under an international scheme which is considered equivalent to the requirements of the Carbon Neutral Program. Mutual recognition of certification would avoid the need for organisations to undergo two separate certification processes, and instead certification under one scheme would automatically lead to recognition under the other.

Negotiating and implementing a mutual recognition arrangement with an international scheme could be a complex process. Calculation methods would need to align and consideration would need to be given to the impact of any material differences. Furthermore, the two bodies administering the schemes would need to agree an approach to ensure that changes to either scheme do not affect the overall integrity of the mutual recognition arrangements.

Feedback is sought from businesses and organisations on the level of interest in mutual recognition and which international carbon neutral certification schemes should be considered for mutual recognition.


2.2 (a) Feedback is sought from businesses and community groups on new offset units which could be considered by the Government for inclusion in the NCOS eligible offsets list.

2.2 (b) Would your organisation support aligning the NCOS with ICROA approved offset standards? Would there be any exceptions or additions to the ICROA list?

2.2 (c) Would your organisation be interested in a mutual recognition arrangement? If so, with which international carbon neutral certification scheme?

3. ADMINISTRATION OF THE CARBON NEUTRAL PROGRAM

This part of the consultation paper reviews the administration of the Carbon Neutral Program to ensure that it provides a mechanism for the efficient and cost-effective certification of carbon neutral claims.

3.1 Administrative responsibility for the Carbon Neutral Program

The Carbon Neutral Program is currently administered by the Australian Government Department of the Environment. From 2010 to 2013, Low Carbon Australia Ltd (a Commonwealth statutory body) administered the Carbon Neutral Program on behalf of the Government.

Overseas carbon neutral schemes are administered by government entities (like New Zealand’s CarboNZero, Japan’s carbon neutral program and the UK Carbon Trust) as well as by the private sector (for example, the Carbon Reduction Institute).

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A key issue for consideration under this Review is whether administration by the Government or an external body would be best for the long term viability of the Carbon Neutral Program. Organisations participating in the review are asked to consider a number of factors in providing feedback on this issue.

Advantages of Non-Government Administration

A private sector administrator may bring various value-added services to the operation of the Carbon Neutral Program. These could include expertise in marketing, access to broader industry networks, economies of scale and targeted promotion. Such a body could potentially give the Carbon Neutral Program a greater commercial and entrepreneurial focus which in turn could drive long term growth in participation and the quantum of emissions offset under the Program.

Consumer confidence in a Government backed administration

While there are potential benefits from private sector administration of the Carbon Neutral Program, it is possible that consumer confidence in the integrity and impartiality of a Government administered scheme may be greater than one administered by the private sector. However, through well designed checks and balances, the Government could maintain scrutiny over the administration of the Carbon Neutral Program, even if a private sector administrator was appointed.

Government oversight of the administration of the Carbon Neutral Program could be maintained through:

setting clear performance indicators regarding the level of service expected of the provider and regularly monitoring its work against those requirements

providing clear avenues for participants to provide feedback on the performance of the provider, and

ensuring that the Government retains oversight of key policy decisions related to the administration of the scheme to ensure its ongoing alignment with other features of climate change policy.

Feedback is sought on whether such measures would ensure that certification is being administered properly and that consumer confidence in the integrity of Carbon Neutral Program certification could be maintained.

Potential Conflicts of Interest

Some non-government entities may not be suitable candidates for administration of the Carbon Neutral Program because of actual or perceived conflicts of interest with their other activities or existing clients. Clear guidelines around managing conflicts of interest, including the declaration of any potential interests, could be adopted as part of decision making on which entities are best placed to administer the Carbon Neutral Program.

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3.1 (a) Do you or your organisation have a preference for the Government (through the Department of the Environment or another body) retaining administration of the Carbon Neutral Program? What are the benefits or costs of this approach?

3.1 (b) What would be the benefits or costs of having the Carbon Neutral Program administered by an external provider?

3.2 Financial aspects of the Carbon Neutral Program

The Australian Government Department of the Environment administers the Carbon Neutral Program on a cost recovered basis. Businesses and other organisations have suggested that they were prepared to pay fees to the Government if it would secure an ongoing carbon neutral program.

Feedback on options for reducing the costs of participation is sought in relation to three items: annual certification fees; direct participation costs; and the indirect costs of staff time and organisational resources.

Certification fee rates

Annual certification fees are set at rates which enable the Carbon Neutral Program to be administered on a cost recovery basis. Fee tiers are based on the size of an organisation’s carbon footprint and this helps to ensure the costs of Carbon Neutral Program certification are proportional to the scale of the organisation and the costs of administration for the Government.

Direct costs

Direct costs of participation include offset purchase costs, audit fees and consultancy costs. Participating businesses have identified that the cost of purchasing offset units dominates the overall cost of participation for larger businesses. However, for smaller businesses with fewer emissions to offset, the other costs of participation are proportionally more significant.

Under the ERF, auditing of credited projects is structured according to a risk-based approach and some participants have proposed this also be employed in administration of the Carbon Neutral Program. In the context of the Carbon Neutral Program, this could mean that the frequency and scope of auditing requirements would be based upon the risk profile of the organisation seeking certification. For example, existing participants that have a strong track-record of meeting reporting requirements accurately may be considered lower risk and could qualify for a reduced auditing burden. Alternatively, certain industries may be identified having relatively straight forward reporting calculations and therefore not require the depth of auditing needed for more complex areas.

Such a risk-based approach could be structured to reduce the auditing requirements on low risk small businesses for example.

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Indirect costs

Indirect costs include the time of staff and company resources used in gaining certification and continuing participation. These costs tend to be highest when an organisation first joins the Carbon Neutral Program and lower in subsequent years as their in-house carbon accounting capability grows. Feedback is sought on ways that indirect costs could be lowered.


3.2 (a) How can the costs of auditing be reduced for participants, while not significantly reducing the credibility of the program?

3.2 (b) How could a risk based audit approach be developed for the Carbon Neutral Program which takes into account the profile of the organisation concerned?

3.2 (c) How has your organisation managed the challenges of entering the Carbon Neutral Program and how could this process be improved, particularly for small businesses?

3.3 Improving the Carbon Neutral Program Guidelines

The Carbon Neutral Program Guidelines, in conjunction with the NCOS, set out the requirements that applicants must satisfy to achieve certification under the Carbon Neutral Program. The Guidelines are designed to assist organisations to manage their emissions and achieve carbon neutral certification in a consistent, credible and transparent manner. For reference, a detailed diagram of the certification process is provided in Appendix C which is taken from section 2.1 of the Guidelines.

In line with best practice under the NCOS, the Guidelines specify that participants are required to:

measure the carbon footprint of their organisation, product or event;

monitor and reduce emissions (to the extent possible); and

purchase and cancel sufficient eligible carbon offset units to offset the remaining emissions associated with the organisation, product or event.

The Guidelines require that the steps taken to measure, reduce and offset emissions are made transparent so that any carbon neutral claims can be assessed by the public. This in turn can help build confidence in the robustness of the carbon neutrality arrangements.

As part of the certification process, applicants must execute the NCOS Carbon Neutral Administration Agreement and Certification Trade Mark Licence. The licence outlines reporting periods and fees, as well as granting certified participants the right to use the NCOS Carbon Neutral Trade Mark to promote their carbon neutrality. Section 3 of the Guidelines has details on the licence arrangements.

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In addition to the Guidelines, guidance templates are also provided to assist applicants in participating in the Carbon Neutral Program. Specific feedback is welcomed on improving the guidance templates which are provided by the Australian Government Department of the Environment for use in applying under the Carbon Neutral Program, including the Independent Audit Report Guidance Template.

The NCOS and Carbon Neutral Program Guidelines were initially developed separately and there is some duplication in the documents. As a part of this review process, the Carbon Neutral Program Guidelines will be examined to ensure that any unnecessary duplication with the NCOS is removed.

Feedback has been received from Carbon Neutral Program participants that the usability of the Trade Mark Licence should be improved. As part of this review process, the License will be amended particularly to remove the need for participants to seek multiple approvals from the Government for use of the logo.


3.3 (a) How could the usability of the NCOS Carbon Neutral Administration Agreement and Certification Trade Mark Licence be improved?

3.3 (b) What specific changes would you or your organisation like to see made to the guidance templates?

3.4 The NCOS Carbon Neutral Program Consumer Trade Mark

Once organisations gain certification through the Carbon Neutral Program, they can use the NCOS Carbon Neutral Certified trade mark under license for promotional and marketing purposes.

Some organisations use the trademark prominently in the marketing of their carbon neutral goods and services while others do not. The Department has received feedback from some organisations who consider that the trade mark could divert attention away from their own branding and are therefore not inclined to make it a prominent feature of their marketing.

The Government takes steps to draw public attention to the NCOS and the Carbon Neutral Program. Commonwealth Ministers with responsibility for the Carbon Neutral Program frequently publicise the Carbon Neutral Program by issuing press releases and often participate in public events that recognise when new companies or products become part of the Carbon Neutral Program.

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Some organisations have suggested that they would be more willing to market the Carbon Neutral Program trademark if the Government did more to promote the NCOS and the Carbon Neutral Program.

The Carbon Neutral Program is administered on a cost recovery basis from the fees paid by participating organisations. If the Government was to put more resources into promoting the Carbon Neutral Program and the trade mark, this may result in an increase in the participation fees.


3.4 (a) Do you think the Government or another organisation working with the Government should do more to publicise the NCOS and Carbon Neutral Program? If so, how could this be done?

3.4 (b) If you are a Carbon Neutral Program participant or are thinking of becoming one, how much value would you place on the Carbon Neutral Program trademark? Do you use it in your own marketing?

3.4 (c) If the trademark was no longer offered, how could your products be distinguished as carbon neutral?

3.4 (d) Would you be willing to pay higher fees to participate in the program if the Government did more to market the Carbon Neutral Program and the trademark?

3.4 (e) Are there other ways that the Government or whoever administers the Carbon Neutral Program could promote the program or deliver recognition to its participants?

4. STREAMLINING AND IMPROVING RULES AND PROCEDURES

This section considers options for streamlining the rules and procedures of the NCOS and Carbon Neutral Program while maintaining carbon accounting integrity. The options have been developed to respond to feedback received from Carbon Neutral Program members and industry service providers during administration of the Carbon Neutral Program.

There are two broad drivers for consideration of the issues which are raised:

(a) Streamlining rules and procedures, and

(b) Meeting the evolving expectations of consumers and business for the NCOS and Carbon Neutral Program.

4.1 Threshold for small emissions sources

Estimating small emissions sources can be difficult and time consuming. The benefits of requiring reporting of these emissions are often outweighed by the inconvenience to participants. Establishing a threshold level for allowing small emissions to be excluded from calculation could reduce confusion about the situations where this may apply.

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A threshold approach is used in some international standards including the British Standards Institute Publicly Available Specification (PAS 2050:2011), where a materiality threshold of one per cent applies to ensure that very minor sources of emissions do not require the same treatment as more significant sources. This exclusion from calculation is subject to an overall requirement that at least 95 per cent of total emissions is quantified.

The NCOS provides for scope 3 activities to be estimated and then excluded from the carbon neutral foot print calculation where the emissions are likely to be negligible, providing the overall integrity of the carbon account is not impacted. Any organisation excluding scope 3 emissions in this way must disclose and justify their reasoning.

The use of materiality thresholds is common in many international offset schemes and can lead to efficiencies without impacting on the robustness of offset arrangements. However, it is important to consider the reporting requirements for justifying that emissions fall below a particular threshold. In some instances, for example, proving that 95 per cent of emissions have been quantified may be no less burdensome than reporting all emissions.


4.1 (a) Would you or your organisation support the introduction of a materiality threshold under the NCOS whereby emissions sources which are estimated to contribute less than a given percentage of emissions could be excluded from the carbon calculations?

4.1 (b) If a materiality threshold was introduced, how could it be ensured that the reporting required to demonstrate the threshold was significantly less than reporting all emissions?

4.1 (c) Are there other options for dealing with materiality?

4.2 Calculating and reporting Scope 3 emissions

Scope 3 emissions are indirect greenhouse gas emissions arising from a facility’s activities, but physically produced elsewhere in the economy, for example emissions from the production of paper used in the facility’s office. The relative size of these emissions when compared to scope 1 (direct emissions) and scope 2 emissions (emissions resulting from electricity generation, heating and cooling consumed by the facility) can be relatively small in some industries. However, in other industries, for example services sectors, scope 3 emissions may constitute the bulk of emissions.

Where a National Greenhouse Accounts (NGA) factor exists for a particular scope 3 emission, reporting can be simpler. However, many common emissions sources do not have an NGA factor. The Carbon Neutral Program Guidelines list accepted methods and sources of other scope 3 emissions and also allow use of licensed financial input output tools in certain circumstances.

Participants in the Carbon Neutral Program have indicated that they find the NCOS scope 3 reporting requirements overly burdensome. Through this review a number of options for simplifying scope 3 reporting will be considered, including those outlined below.

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Industry sector based add-on/scaling factors

Creating and publishing sector based scope 3 scaling factors using established modeling approaches would allow assessment of scope 3 emissions based on sector of activity. For example, an airline could estimate its scope 3 emissions by multiplying their Scope 1 and 2 emissions by an aviation sector-specific scaling factor.

Outlining methods for reporting common scope 3 emission sources

A list of common scope 3 reporting methods could be maintained to outline accepted methods and factor sources for particular common scope 3 emission sources.

Standard Factors

Factors may be commissioned for common sources specifically for the NCOS and updated based on both value and volume. The costs associated with this approach would need to be considered, particularly given the cost recovery basis on which the Carbon Neutral Program is administered.

Consultation Question

4.2 Feedback is sought on the options outlined for simplifying scope 3 reporting, as well as other approaches that participants may be aware of.

4.3 Calculating emissions from an event

Carbon emissions from events such as conferences, sporting events, concerts and corporate meetings come from a variety of sources. These include the energy used by venues, food and drink consumed and the transportation of guests. The NCOS currently allows for the certification of carbon neutral events, although the guidance given on how to calculate an event’s emissions footprint is limited (see section 4.4 of the NCOS).

One approach for certifying events as carbon neutral could be for participants to commit to hold a carbon neutral event and agreeing an estimate of the event’s carbon footprint prior to its commencement. After the event, a true-up of the actual footprint could be agreed with the program administrator. Certification and audit processes would be required to ensure appropriate offsets were surrendered for carbon neutrality. The program administrator would need to develop or endorse further standards for estimating the carbon footprint of an event.


4.3 (a) Feedback is sought on whether there is significant interest in certification for events and major projects.

4.3 (b) Participants are asked to consider event footprint calculation methodologies which are accepted as having carbon accounting integrity.

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4.4 Meeting the evolving expectations of business and the community

4.4.1 Avoiding potential for double counting of emission reductions

A key principle in carbon accounting is that any single emission reduction should only be credited or accounted for once. This underpins the need for accurate registries of carbon offset units and adequate tracking of credits generated from offset projects.

Where a project proponent earns credits for conducting an emission reduction activity they should lose the right to claim those reductions as their own if they sell those credits. If not, the underlying emission reduction is being claimed twice, once by the proponent and again by the person to whom the unit is sold.

The Carbon Neutral Program already addressed this issue in relation to Renewable Energy Certificates (RECs). The Carbon Neutral Program clarifies that when a REC is purchased from an entity that has claimed the associated emission reduction, for the Carbon Neutral Program or another program, those RECs cannot be used in a carbon neutral claim.

As the Carbon Neutral Program Guidelines presently stand, there is no guidance preventing an organisation generating an ACCU through an ERF project and then also claiming the associated emission reduction to lower its carbon footprint for certification under the Carbon Neutral Program. In order to address this kind of double accounting of emission reductions, it is proposed that the following requirement be introduced into the Carbon Neutral Program Guidelines:

“At the time of filing an application under the Carbon Neutral Program, where an organisation has sold Australian Carbon Credit Units created under the ERF in the preceding financial year, the carbon equivalent of those credits issued must be added to the organisation’s carbon footprint calculation.”

This prevents double counting through the sale of credits for an emission reduction and also accounting for that reduction in lowering the organisation’s footprint. This approach aligns with the treatment of RECs under the Carbon Neutral Program Guidelines.


4.4.1 (a) Do you agree with the proposed approach to avoiding double counting? If not, how would you address the issue?

4.4.1 (b) Feedback is sought on the proposed wording of the new requirement to be included in the Carbon Neutral Program Guidelines.

4.4.2 Partial certification under the Program

Some businesses and community groups have asked for a ‘partial certification’ option to be available under the Carbon Neutral Program. Partial certification would acknowledge businesses or products which have reduced or offset some, but not all, of their emissions. This may provide a pathway to full certification in the future.

A number of carbon neutral certification schemes overseas offer partial certification options for businesses that cannot meet the requirements of full ‘carbon neutral’ certification. For

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example, the Carbon Reduction Institute offers a ‘low carbon certification’ option as part of the suite of options available to their participants.

Partial certification could be implemented in a number of ways including:

Partial certification through offsetting only a certain set of emissions (for example by reporting only scope 1 emissions).

Partial certification based on the stage of carbon management an organisation has reached, such as measurement, reduction or offsetting. This approach would not require participants to offset their emission in the early stages of their entry into the Carbon Neutral Program but would recognise that they have met, for example, measurement requirements.

Introducing partial certification has the potential to broaden participation in the Carbon Neutral Program. In particular, it would encourage businesses that are not yet prepared to offset their entire carbon footprint to nevertheless reduce some portion of their overall emissions. By potentially increasing participation, partial certification could deliver more emission abatement.

There is a risk, however, that this approach may confuse consumers as to the meaning of the certification brand and dilute the impact of certification for those businesses that are recognised as carbon neutral.

A separate partial certification trade mark could be developed to differentiate clearly between organisations which have achieved full carbon neutrality and those that are only partially certified.


4.4.2 (a) Is there is a need for a partial certification option?

4.4.2 (b) If you or your organisation supports partial certification, how would you like to see this implemented?

4.4.2 (c) How could the risks described above of introducing partial certification be managed?

4.4.3 Recognising offset co-benefits under the Program

‘Co-benefits’ refer to the additional or supplementary benefits which result from carbon abatement projects. They may be in the form of other environmental benefits (for example, avoiding deforestation will not only reduce emissions but could also preserve wildlife habitat) or the broader social benefits of an abatement project (for example, employment creation in indigenous communities).

Just as there are international standards, which approve carbon offsets, there are also co-benefit standards which assess offset projects for their broader social and environmental impact. The International Carbon Reduction and Offset Alliance (ICROA) recognizes two co-benefit standards, the Social Carbon Standard and the Climate, Community & Biodiversity Alliance Standard.

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Some businesses and community groups have asked that provision be made in the NCOS to recognize offset types that have co-benefits beyond carbon reduction.

Feedback is sought on the extent to which the NCOS and the Carbon Neutral Program should deal with co-benefits given that their objectives are limited to carbon neutral certification.

If co-benefits were recognised under the NCOS, feedback is sought on the most effective, transparent and equitable means of selecting which co-benefits to recognise. Some options for recognition of co-benefits could include:

encouraging participants to report co-benefits in their public disclosure statements and not providing any further government backed endorsement of these claims. Under this model certification would continue to deal with carbon neutrality only, or

listing in the Standard robust frameworks that certify co-benefits of offset projects such as those identified by ICROA (being, Social Carbon Standard and Climate, Community & Biodiversity Alliance Standard) and using these as the basis for acknowledging co-benefits. Participants would need to meet the requirements of these co-benefit standards independently.

Feedback is also sought as to other possible options for recognizing co-benefits along side the NCOS and Carbon Neutral Program.


4.4.3 (a) Views are sought on whether co-benefits should be recognised under the NCOS or the Carbon Neutral Program. If so, how can co-benefits best be recognised?

4.4.3 (b) If co-benefits are to be acknowledged under the Carbon Neutral Program, how should the Carbon Neutral Program select which co-benefits to recognise?

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GLOSSARY

Carbon Neutral Program Australian Government National Carbon Offset Standard Carbon Neutral Program is a voluntary scheme which certifies products, business operations or events as carbon neutral against the NCOS.

EMP Emissions Management Plan

ERF The Emissions Reduction Fund (ERF) is the centre-piece of the Australian Government's climate change strategy. The ERF will support Australian businesses and households to take practical, direct action to reduce emissions and improve the environment. The objective of the Emissions Reduction Fund is to help achieve Australia’s 2020 emissions reduction target of five per cent below 2000 levels by 2020.

ERF White Paper Emissions Reduction Fund White Paper published April 2014 and available at the Department of the Environment’s website.

ICROA International Carbon Reduction and Offset Alliance is a non-profit professional industry body which aims to promote best practices in carbon management and offsetting to support voluntary climate mitigation efforts. Among other activities ICROA maintains a list of carbon credit accounting and verification standards that meet its own integrity principles.

ICROA currently endorses offsets certified under the Clean Development Mechanism, Joint Implementation, CarbonFix Standard, Climate Action Reserve, Gold Standard, Verified Carbon Standard and American Carbon Registry.

For more information see the website: www.icroa.org/

NCOS Australian Government National Carbon Offset Standard which provides national consistency and consumer confidence in the voluntary carbon market by:

setting minimum requirements for calculating, auditing and offsetting the carbon footprint of an organisation, product or event and offsetting emissions; and

providing guidance on what is a genuine voluntary carbon emission offset.

New Zealand Units NZUs are the primary domestic emission units under the New Zealand emissions trading scheme and are issued by the New Zealand Government.

For more information see the website: www.climatechange.govt.nz/emissions-trading-scheme/

PAS 2050:2011 British Standards Institute Publicly Available Specification

PDS Public Disclosure Statement

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Plan Vivo Standard The Plan Vivo Standard for Community Payments for Ecosystem Services (PES) is based on 20 years of experience in connecting rural communities to the voluntary carbon market and aims to provide a robust and pragmatic framework for rural communities to access voluntary carbon markets through gaining certified carbon credits. For more information see the website: www.planvivo.org

Scope 1 emissions The release of greenhouse gas into the atmosphere as a direct result of an activity or series of activities (including ancillary activities) that constitute the facility.

Scope 2 emissions Emissions released into the atmosphere as a direct result of one or more activities that generate electricity, heating, cooling or steam consumed by the facility, but do not form part of the facility.

Scope 3 emissions Emissions resulting from activities conducted by an organisation, except those covered by scope 2 emissions, but which do not occur on the organisations premises.

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APPENDIX A – CONSULTATION QUESTIONS

1.1 Can you suggest changes to the objectives of the NCOS to reflect the current needs of business and the broader community?

2.1 (a) What role does an Australian Government developed standard have in supporting consumer confidence in the local voluntary carbon market?

2.1 (b) Could the NCOS be replaced by an existing standard while still ensuring consumer confidence? Views are sought on which would be the most appropriate standard and why?

2.2 (a) Feedback is sought from businesses and community groups on new offset units which could be considered by the Government for inclusion in the NCOS eligible offsets list.

2.2 (b) Would your organisation support aligning the NCOS with ICROA approved offset standards? Would there be any exceptions or additions to the ICROA list?

2.2 (c) Would your organisation be interested in a mutual recognition arrangement? If so, with which international carbon neutral certification scheme?

3.1 (a) Do you or your organisation have a preference for the Government (through the Department of the Environment or another body) retaining administration of the Carbon Neutral Program? What are the benefits or costs of this approach?

3.1 (b) What would be the benefits or costs of having the Carbon Neutral Program administered by an external provider?

3.2 (a) How can the costs of auditing be reduced for participants, while not significantly reducing the credibility of the program?

3.2 (b) How could a risk based audit approach be developed for the Carbon Neutral Program which takes into account the profile of the organisation concerned?

3.2 (c) How has your organisation managed the challenges of entering the Carbon Neutral Program and how could this process be improved, particularly for small businesses?

3.3 (a) How could the usability of the NCOS Carbon Neutral Administration Agreement and Certification Trade Mark Licence be improved?

3.3 (b) What specific changes would you or your organisation like to see made to the guidance templates?

3.4 (a) Do you think the Government or another organisation working with the Government should do more to publicise the NCOS and Carbon Neutral Program? If so, how could this be done?

3.4 (b) If you are a Carbon Neutral Program participant or are thinking of becoming one, how much value would you place on the Carbon Neutral Program trademark? Do you use it in your own marketing?

3.4 (c) If the trademark was no longer offered, how could your products be distinguished as carbon neutral?

3.4 (d) Would you be willing to pay higher fees to participate in the program if the Government did more to market the Carbon Neutral Program and the trademark?

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3.4 (e) Are there other ways that the Government or whoever administers the Carbon Neutral Program could promote the program or deliver recognition to its participants?

4.1 (a) Would you or your organisation support the introduction of a materiality threshold under the NCOS whereby emissions sources which are estimated to contribute less than a given percentage of emissions could be excluded from the carbon calculations?

4.1 (b) If a materiality threshold was introduced, how could it be ensured that the reporting required to demonstrate the threshold was significantly less than reporting all emissions?

4.1 (c) Are there other options for dealing with materiality?

4.2 Feedback is sought on the options outlined for simplifying scope 3 reporting, as well as other approaches that participants may be aware of.

4.3 (a) Feedback is sought on whether there is significant interest in certification for events and major projects.

4.3 (b) Participants are asked to consider event footprint calculation methodologies which are accepted as having carbon accounting integrity.

4.4.1 (a) Do you agree with the proposed approach to avoiding double counting? If not, how would you address the issue?

4.4.1 (b) Feedback is sought on the proposed wording of the new requirement to be included in the Carbon Neutral Program Guidelines.

4.4.2 (a) Is there is a need for a partial certification option?4.4.2 (b) If you or your organisation supports partial certification, how would you like to see

this implemented?4.4.2 (c) How could the risks described above of introducing partial-certification be

managed?

4.4.3 (a) Views are sought on whether co-benefits should be recognised under the NCOS or the Carbon Neutral Program. If so, how can co-benefits best be recognised?

4.4.3 (b) If co-benefits are to be acknowledged under the Carbon Neutral Program, how should the Carbon Neutral Program select which co-benefits to recognise?

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APPENDIX B – NATIONAL CARBON OFFSET STANDARD (VERSION 2)

National Carbon Offset Standard

Version 2

2 May 2012

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ContentsTerms and definitions 28

1. Introduction 32

1.1 Carbon offsetting in the context of a carbon price 32

1.2 Objectives of the Standard 32

2. Normative reference 33

3. Carbon offsets 34

3.1 Offsets integrity principles 34

3.2 Eligible offset units 35

4. Carbon footprint calculation 36

4.1 Carbon footprint calculation principles 36

4.2 Carbon footprint calculation of an organisation 37

4.2.1 Defining the boundary of an organisation 37

4.2.2 Setting a base year and base year re-calculation policy 38

4.2.3 Emissions sources associated with the organisation boundary 39

4.2.4 Emissions factors and calculation methodology 41

4.2.5 Emissions attributable to the organisation 42

4.3 Carbon footprint calculation of a product 42

4.3.1 Defining the scope, including the system boundary 43

4.3.2 Setting a base year and base year re-calculation policy 43

4.3.3 Emissions sources within the system boundary 43

4.3.4 Life cycle inventory analysis 44

4.3.5 Emissions attributable to the life cycle of the product 45

4.4 Carbon footprint calculation of an event 45

4.4.1 Defining the boundary of an event 46

4.4.2 Event baselines 46

5. Achieving carbon neutrality 46

5.1 Emissions management plan 46

5.2 Cancellation of eligible offsets 47

5.3 Reporting 47

5.4 Guidance on making carbon neutral claims 47

6. Audit 48

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TERMS AND DEFINITIONSAdditionality: A requirement that a project or activity provide abatement that is additional to any that would occur in the absence of the project or activity, and that is additional to abatement that would occur anyway to meet Australia’s International Target.

Australian Carbon Credit Unit (ACCU): An emissions unit issued under the Carbon Farming Initiative (CFI) established by the Carbon Credits (Carbon Farming Initiative) Act 2011, for verified emissions reductions or removals achieved by projects approved under the CFI. ACCUs are also referred to as ‘CFI credits’.

Annex I countries: Countries listed in Annex I to the United Nations Framework Convention on Climate Change (UNFCCC), including all developed (OECD) countries and the countries in transition in central and Eastern Europe (including Russia and Ukraine). In the context of the Kyoto Protocol, ‘Annex I country’ is used to refer to a party included in Annex I to the UNFCCC with a commitment inscribed in Annex B to the Kyoto Protocol.

Business unit: A unit that is recognised by an entity as having administrative responsibility for one or more facilities of the corporation.

Cancellation: Transfer of a unit to a cancellation account so that it may not be used for any further purpose.

Carbon dioxide equivalence (CO2-e): A standard measure that takes account of the global warming potential of different greenhouse gases and expresses the effect in a common unit.

Carbon footprint: A measure of the carbon dioxide equivalent emissions attributable to an activity. A carbon foot print can relate to the emissions of an individual, household, organisation or product.

Carbon neutrality: Refers to a situation where the net emissions associated with a an organisation’s activities, product, services or events are equal to zero because the organisation has reduced its emissions, and acquired and cancelled carbon offsets for its remaining emissions.

Carbon offset: Represents reductions or removals of greenhouse gases from the atmosphere by sinks, relative to a business-as-usual baseline. Carbon offsets are tradeable and often used to negate (or offset) all or part of another entity’s emissions.

Carbon Price Mechanism: the mechanism for putting a price on greenhouse gas emissions established under the Clean Energy Act 2011.

Carbon sink: A natural or manmade reservoir, such as a forest, that stores carbon.

Carbon Unit: A unit representing one tonne of CO2-e issued under section 94 of the Clean Energy Act 2011.

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Certified Emission Reduction (CER): A Kyoto unit corresponding to one metric tonne of carbon dioxide equivalent emissions, and issued for verified emission reductions or removals achieved by projects approved under the Clean Development Mechanism (CDM). CDM projects undertaking afforestation and reforestation activities issue temporary (tCERs) and long term units (lCERs), which must be replaced after a specified period.

Clean Development Mechanism (CDM): The carbon offset mechanism established under Article 12 of the Kyoto Protocol. Countries with emissions targets under the Kyoto Protocol can meet their obligations using credits from greenhouse gas abatement projects established under Article 12 in countries that are Party to the Protocol but do not have an emission target.

Emission factor: A factor that specifies the kilograms of carbon dioxide equivalent emitted per unit of activity.

Emissions Reduction Unit (ERU): A Kyoto unit corresponding to one metric tonne of carbon dioxide equivalent emissions reduced or sequestered arising from a Joint Implementation project (defined in Article 6 of the Kyoto Protocol).

Facility: An activity, or a series of activities (including ancillary activities), that involve the production of greenhouse gas emissions, the production of energy or the consumption of energy and that form a single undertaking or enterprise and meet the requirements of the National Greenhouse and Energy Reporting (NGER) Regulations.

Functional Unit: A means of expressing the greenhouse gas emissions of a product in a way that is meaningful for the product being investigated (for example kilograms of C02-e per unit of product).

Greenhouse gases (GHG): The atmospheric gases responsible for causing global warming and climate change. The Kyoto Protocol list six greenhouse gases -carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro-fluorocarbons (HFCs), per-fluorocarbons (PFCs) and sulphur hexafluoride (SF6).

Greenhouse Friendly Verified Emission Reductions: Emission reduction units that have been generated under the Australian Government’s Greenhouse Friendly program, which closed on 1 July 2010.

Joint Implementation (JI): A market-based implementation mechanism defined in Article 6 of the Kyoto Protocol, allowing Annex I countries or companies from these countries to implement projects jointly that limit or reduce emissions or enhance sinks.

Kyoto Protocol: An international treaty created under the UNFCCC in 1997, which entered into force in 2005. The Kyoto Protocol sets binding targets for the reduction of greenhouse gas emissions by developed countries and countries in transition. It includes individual emission reduction targets for Annex I countries to be met within the first commitment period of 2008-12.

Kyoto unit: Emissions units created under the Kyoto Protocol. Kyoto units include Assigned Amount Units (AAUs), CERs (including tCERs and lCERs), ERUs and Removal Units (RMUs).

Life cycle assessment: The compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system throughout its life cycle.

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Limited Assurance: A level of assurance defined under the NGER legislation whereby the auditor finds that there is no evidence to suggest that a report is not accurate. This is a lower level of assurance than ‘reasonable assurance’.

NGER Act: National Greenhouse and Energy Reporting Act 2007.

National Greenhouse and Energy Reporting (NGER) System: The national reporting framework for information related to the greenhouse gas emissions, and energy production and use of corporations operating in Australia. The framework is established under Commonwealth legislation, which makes registration and reporting mandatory for corporations whose greenhouse gas emissions or energy production or use meet certain thresholds.

Offset: See carbon offset.

Operational control: The highest authority within a corporate group to introduce and implement any or all of the following for the Facility: (i) operating policies; (ii) health and safety policies; (iii) environmental policies. Only one corporation can have operational control over a Facility at any time.

Permanence: this is a requirement that carbon offsets represent permanent reductions in emissions or carbon sequestration that is permanently maintained and not re-released into the atmosphere. Sequestration is generally regarded as permanent if it is maintained on a net basis for around 100 years.

Reasonable Assurance: A level of assurance defined under the NGER legislation meaning that the report is accurate in all material respects. A high but not absolute level of assurance.

Removal Unit (RMU): A unit created under the Kyoto Protocol corresponding to one metric tonne of carbon dioxide equivalent emissions sequestered and issued for removals of carbon dioxide from the atmosphere by eligible land use, land-use change and forestry activities.

Scope 1 emissions: The release of greenhouse gas into the atmosphere as a direct result of activities at a facility.

Scope 2 emissions: The release of greenhouse gas as a result of electricity generation, heating, cooling or steam that is consumed by a facility.

Scope 3 emissions: Greenhouse gases emitted as a consequence of a facility’s activities but by another facility.

Sequestration: The removal of atmospheric carbon dioxide, either through biological processes (for example, photosynthesis in plants and trees), or geological processes (for example, storage of carbon dioxide in underground reservoirs).

Sink: See carbon sink.

The Standard: National Carbon Offset Standard.

Sub-facility: Organisational units that make up a facility.

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United Nations Framework Convention on Climate Change (UNFCCC): An international treaty, adopted in 1992, aimed at achieving the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.

Verified Carbon Unit (VCU): A unit corresponding to one metric tonne of carbon dioxide equivalent emissions reduced, certified and issued under the Verified Carbon Standard.

Voluntary Emissions Reduction (VER): Emission reduction units that have been generated according to the Gold Standard.

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1. INTRODUCTION1.1 Carbon offsetting in the context of a carbon price

The Australian Government’s Clean Energy Future plan is designed to meet Australia’s emissions reduction targets in a flexible and cost effective manner while supporting an effective global response to climate change. A key component of this plan is the carbon price mechanism established under the Clean Energy Act 2011.

The Government recognises that many businesses and individuals are concerned about climate change and will wish to to make their own contribution to reducing greenhouse gas emissions. The National Carbon Offset Standard (‘the Standard’) is one way that organisations may take additional action to reduce carbon pollution beyond Australia’s national targets.

The Standard was developed following extensive stakeholder consultation. This revealed a strong consensus that achieving carbon neutrality involves action that goes beyond compliance with the carbon price mechanism, and opposition to the idea that compliance with the carbon price equates to carbon neutrality.

Accordingly, eligible offsets cancelled to achieve carbon neutrality under this Standard must be in addition to any eligible units surrendered to meet a liability under the carbon price mechanism (section 4 refers).

1.2 Objectives of the Standard

The Standard is designed to ensure that consumers have confidence in the voluntary carbon offset market and the integrity of the carbon offset and carbon neutral products they purchase. It provides guidance to businesses who wish to make their organisation carbon neutral or develop carbon neutral products in a way that achieves emissions reductions that are beyond those achieved under domestic mitigation policies and Australia’s national emissions reduction targets.

To be ‘carbon neutral’ means that the net emissions associated with a product or an organisation’s activities are equal to zero. For an organisation or product to become carbon neutral that organisation must:

1 measure its carbon footprint;

2 reduce emissions; and

3 offset any residual emissions.

The carbon foot print of an organisation, product or event can be measured for many different reasons. When greenhouse gas emissions are measured and reported, they are generally better managed.

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It is also best practice for an organisation to publish information about the steps taken to measure, reduce and offset their emissions. This allows the public to objectively assess any carbon neutral claims.

The Standard specifies:

the types of carbon offsets that constitute genuine, additional emissions reductions;

the general principles and requirements for calculating the carbon footprint of a product, organisation or event;

requirements for reporting the carbon footprint, measures taken to reduce emissions and the amount reduced, the emissions offset, and the type of carbon offsets purchased and cancelled; and

requirements for auditing carbon footprint calculations and offset claims.

A robust and transparent audit model underpins confidence in carbon neutral claims. Independent audit validates the accuracy and completeness of carbon footprint calculations and the purchase and cancellation of an equivalent amount of eligible offset units.

The NCOS Carbon Neutral Program Guidelines provides further guidance on how to implement the Standard. The Guidelines set out the reporting and other requirements for carbon neutral certification.

2. NORMATIVE REFERENCEThe Standard contains provisions which are based on existing Australian and international standards and Australian legislation. These are listed below.

Australian Standard (AS) ISO 14064 series, including:

o AS ISO 14064 Greenhouse gases Part 1: Specification with guidance at the organisation level for the quantification and reporting of greenhouse gas emissions and removals (AS ISO 14064.1:2006)

o AS ISO 14064 Greenhouse gases Part 2: Specification with guidance at the project level for quantification and reporting of greenhouse gas emission reductions and removal enhancements (AS ISO 14064.2:2006)

o AS ISO 14064 Greenhouse gases Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions (AS ISO 14064.3:2006)

International Standard ISO 14040 series, including:

o ISO 14040: Environmental management – Life cycle assessment – Principles and frameworks (ISO 14040:2006)

o ISO 14044: Environmental management – Life cycle assessment – Requirements and guidelines (ISO 14044:2006)

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International Standard ISO 14065: Greenhouse gases – Requirements for greenhouse gas validation and verification bodies for use in accreditation of other forms of recognition (ISO 14065:2007)

Other international standards that are based on the ISO 14040 series, for example PAS 2050:2011 – Specification for the assessment of the life cycle greenhouse gas emissions of goods and services.

The Greenhouse Gas (GHG) Protocol, including:

o GHG Protocol – A corporate accounting and reporting standard (revised edition)

o The GHG Protocol for Project Accounting

o GHG Protocol – Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011)

o GHG Protocol – Product Life Cycle Accounting and Reporting Standard (2011)

The National Greenhouse and Energy Reporting Act 2007 (NGER Act) and supporting legislation and documentation, including:

o National Greenhouse and Energy Reporting Regulations 2008 (NGER Regulations)

o National Greenhouse and Energy Reporting (Measurement) Determination 2008 (NGER Determination)

o National Greenhouse and Energy Reporting Technical Guidelines (NGER Technical Guidelines)

o National Greenhouse Account Factors (NGA Factors)

All standards and legislation are subject to revision. Organisations should use the most recent version or editions of any listed standards, guidance material or legislation.

3. CARBON OFFSETS3.1 Offsets integrity principles

The offset integrity framework for Australian Carbon Credit Units generated under the Carbon Farming Initiative (CFI) is set out in the legislation for the Initiative. In order for non-CFI offset units to be eligible for use under the Standard they must be:

(a) Additional: Abatement must go beyond what would be required to meet regulatory obligations or undertaken as part of ‘business-as-usual’; and additional to Australia’s international emissions targets.

(b) Permanent: Offsets must represent permanent reductions in greenhouse gas emissions. In the case of sinks, this requires that the carbon stored is sequestered and will not be released into the atmosphere for a period of 100 years.

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(c) Measurable: Methodologies used to quantify the amount of emissions reductions generated must be robust and based on defensible scientific methods. Methodologies must clearly define the greenhouse gas assessment boundary, emissions sources and sinks, and methods for calculating baseline emissions and project abatement.

(d) Transparent: Consumers and other interested stakeholders must have access to information about offset projects, including the applied methodology, abatement estimates and project monitoring arrangements.

(e) Demonstrate avoidance of leakage: an offset project must not cause material increases in emissions elsewhere which nullify or reduce the abatement that would otherwise result under the project.

(f) Independently audited: Greenhouse gas emissions reductions generated by offset projects must be audited by an independent, qualified third party.

(g) Registered: Offset units must be listed and tracked in a publicly transparent registry.

3.2 Eligible offset units

Australian Government Units

The following units issued under Australian Government legislation and programs meet the requirements of this Standard.

All Australian Carbon Credit Units (ACCUs) issued under the CFI;

All credits issued under the former Greenhouse Friendly Program*; and

Carbon Units issued under Australia's Carbon Price Mechanism from 1 July 2015.

*Note: the Government will cancel Kyoto units for Greenhouse Friendly credits issued and cancelled during the Kyoto commitment period; that is by 1 July 2013.

International Units

The following internationally recognised Kyoto Protocol units may be used to meet carbon price liabilities and will also be accepted under this Standard:

Kyoto units

- Certified Emissions Reductions (CERs) from Clean Development Mechanism projects;

- Emission Reduction Units (ERUs) from Joint Implementation projects; and

- Removal Units (RMUs) issued by a Kyoto Protocol country on the basis of land use, land-use change and forestry activities under article 3.3 or 3.4 of the Kyoto Protocol;

1. with the following exceptions:

- long term (lCERs) and temporary (tCERs);

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- CERs and ERUs from nuclear projects, the destruction of trifluoromethane, the destruction of nitrous oxide from adipic acid plants or from large-scale hydro-electric projects not consistent with criteria adopted by the EU (based on the World Commission on Dams guidelines); and

- any other CERs, ERUs and RMUs that the Government has said cannot be used for compliance with the carbon price mechanism.

Any other international units the Australian Government accepts for compliance under the carbon price mechanism.

Other Units

The following voluntary market standards are well established, and units issued and verified under these schemes are widely considered by voluntary carbon market participants to meet this Standard. Before electing to use any of the following units, parties should undertake their own due diligence assessment of the originating projects and underpinning methodologies.

Voluntary Emissions Reductions (VERs) issued by the Gold Standard; and

Verified Carbon Units (VCUs) issued by the Verified Carbon Standard.

Where credits are issued under for reduced emissions from deforestation and degradation (REDD+) projects in developing countries, they must apply methodologies approved under the Standard. Project proponents wishing to have a methodology approved should submit it to the Department of Climate Change and Energy Efficiency for consideration.

4. CARBON FOOTPRINT CALCULATION4.1 Carbon footprint calculation principles

The carbon footprint of an organisation, product or event should be calculated in accordance with the following principles, which are based on those outlined in the GHG Protocol and adopted under the NGER System. These principles are also consistent with those outlined under the other relevant Australian and international standards, including the AS ISO 14064 and ISO 14040 series.

(a) Relevance: Ensure the greenhouse gas inventory of an organisation, or the carbon life cycle assessment of a product, appropriately reflect the greenhouse gas emissions attributed to that organisation or product.

(b) Completeness: Account for and report all greenhouse gas emissions sources and activities within the defined boundary of the organisation or product. Disclose and justify all exclusions.

(c) Consistency: Use consistent methodologies to allow for meaningful comparisons of greenhouse gas emissions over time. Document any changes to the data, boundary, methods, or any other relevant factors.

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(d) Transparency: Greenhouse gas information should be compiled, analysed and documented clearly and coherently so that auditors may evaluate its credibility. Disclose any relevant assumptions and make appropriate references to the calculation methodologies and data sources used.

(e) Accuracy: Ensure that the quantification of greenhouse gas emissions is unbiased (not systematically over or under actual emissions) and that uncertainties are reduced as far as practicable. Where uncertainty is high use conservative values and assumptions.

4.2 Carbon footprint calculation of an organisation

An organisation may use either the greenhouse gas inventory method or the Life Cycle Assessment (LCA) method to calculate its carbon footprint, but the approach selected must be used consistently. Where the organisation chooses the greenhouse gas inventory method, it should apply the following steps.

(a) Prepare a greenhouse gas inventory following the guidance outlined in sections 4.2.1 to 4.2.5 and in accordance with current domestic and international standards.

(b) Prepare a greenhouse gas emissions inventory report, which contains the following components:

i. the organisation boundary;

ii. greenhouse gas emissions sources associated with the organisation boundary;

iii. greenhouse gas emissions factors and calculation methodology;

iv. activity and emissions data collected;

v. assumptions used;

vi. all exclusions and their justification;

vii. a base year and details of the organisation’s base year re-calculation policy; and

viii. final calculated greenhouse gas emissions attributable to the organisation boundary.

Where an organisation chooses to undertake a carbon LCA, it must apply the general approach set out in section 4.3 to its chosen boundary.

4.2.1 Defining the boundary of an organisation

An organisation may measure the greenhouse gas emissions attributable to the whole organisation or only a part of the organisation, such as a business unit, facility, sub-facility or activity.

The boundary of an organisation defines the activities that an organisation should include in its carbon footprint calculation. In all cases, the organisation boundary chosen should be transparently documented and disclosed when making assertions relating to the achievement of carbon neutrality by the organisation.

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If an organisation wishes to calculate the carbon footprint for the entire organisation, it could choose the following definition of an organisation’s boundary, based on the definition used in the NGER Act:

(a) An entire organisation’s boundary includes:

i. all corporate group members; and

ii. all facilities under the operational control of corporate group members.

(b) An organisation’s corporate group members include:

i. the controlling corporation;

ii. subsidiaries;

iii. joint ventures; and

iv. partnerships.

(c) A corporate group member will have operational control over a Facility if it has the authority to introduce or implement:

i. operating policies;

ii. health and safety policies; or

iii. environmental policies.

An organisation requiring further guidance on using this definition to set its organisation boundary should refer to the NGER Act and associated subordinate legislation and guidance.

The GHG Protocol outlines additional corporate level boundaries not covered by the NGER Act that are also suitable for calculating a carbon footprint for carbon neutrality purposes. They are the equity share and financial control approaches.

4.2.2 Setting a base year and base year re-calculation policy

Organisations must set a base year to allow for their emissions to be accurately compared over time.

(a) select the earliest historical base year for which verifiable carbon emissions and removals data are available or use a multi-year average where a single year’s data is unrepresentative of the company’s typical emissions profile;

(b) explain the selection of the base year;

(c) develop a base-year re-calculation policy to account for changes to:

operational boundaries;

ownership and control of greenhouse gas sources and sinks;

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quantification methodologies that result in significant changes to GHG emissions or removals;

address discovery of significant errors; and

(d) document base-year calculations in subsequent carbon footprints.

Chapter 5 of the GHG Corporate Standard provides additional guidance on base year re-calculation approaches.

4.2.3 Emissions sources associated with the organisation boundary

(a) An organisation must calculate all direct emissions (Scope 1) and indirect emissions from the use of electricity, heating, cooling or steam (Scope 2) attributable to sources within its chosen boundary. Scope 1 emission sources are outlined in the NGER Determination and include:

the combustion of fuel for energy;

the extraction, production, flaring, processing and distribution of fossil fuels;

industrial processes where a mineral, chemical or metal product is formed using a chemical reaction that generates greenhouse gases as a by-product; and

waste disposal, either in landfill, as management of wastewater or from waste incineration.

Scope 2 emissions result from activities that generate electricity, heating, cooling or steam that is consumed by a Facility, but do not form part of the Facility.

Scope 3 emissions should be calculated in line with the guidance provided in NGERS where it is reasonably practicable to do so.

Any incidental Scope 1 or Scope 2 emissions may be estimated, in line with the guidance provided in the NGER Reporting Regulations and NGER (Measurement) Determination.

(b)An organisation must consider calculation of indirect (Scope 3) emissions associated with those portions of the organisation’s value chain that fall within the defined boundary. This will enable organisations to identify opportunities for emission reduction activities across their corporate value chain.

(c) An organisation may refer to the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (‘GHG Protocol Scope 3 Standard’) for guidance on producing an inventory of Scope 3 emissions. Applying the Scope 3 Standard will assist organisations to identify significant Scope 3 emissions to include in their inventory. Where practicable, organisations should account for all Scope 3 emissions.

(d)Organisations should follow the accounting and reporting principles of relevance, completeness, accuracy, consistency and transparency when considering which categories of Scope 3 emissions to include in their inventory.

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(e) The GHG Protocol Scope 3 Standard presents the following framework for identifying and categorising Scope 3 emission sources:

Purchased goods and services

Capital goods

Fuel- and energy- related activities (not included in Scope 1 or Scope 2)

Upstream transportation and distribution

Waste generated in operations

Business travel

Employee commuting

Upstream leased assets

Downstream transportation and distribution

Processing of sold products

Use of sold products

End-of-life treatment of sold products

Downstream leased assets

Franchises

Investments

In considering the calculation of Scope 3 emissions, an organisation should

refer to the GHG Protocol which specifies that Scope 3 emissions sources are relevant in the following circumstances:

the Scope 3 emissions from a particular source are likely to be large relative to the organisation’s Scope 1 and Scope 2 emissions;

the Scope 3 emissions from a particular source contribute to the organisation’s greenhouse gas risk exposure;

the Scope 3 emissions from a particular source are deemed relevant by key stakeholders;

the organisation has the potential to influence the reduction of Scope 3 emissions from a particular source; or

the Scope 3 emissions are from outsourced activities previously performed in-house or activities outsourced by the reporting company that are typically performed in-house by other companies in the reporting organisation’s sector.

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(f) It may not be necessary or practicable to account for Scope 3 emissions for the following reasons:

the emissions are likely to be negligible (relative to other Scope 3 emissions);

determining the emissions is not currently possible given available technology;

determining the emissions will be very costly relative to their likely significance; or

there is insufficient data.

Where organisations exclude Scope 3 activities from their inventory, this must be disclosed and justified.

Organisation must not exclude any Scope 3 activities that would compromise the overall integrity of the reported inventory.

An organisation must transparently disclose included and excluded Scope 3 emissions when making any assertions about emissions reductions.

(g) An organisation must calculate emissions of the six greenhouse gas types included under the Kyoto Protocol.

4.2.4 Emissions factors and calculation methodology

(a) An organisation must collect activity data for the greenhouse gas emissions within its boundary.

(b) An organisation must calculate the direct and indirect greenhouse gas emissions resulting from the emissions sources within its boundary.

Guidance on calculating emissions is provided in the NGER (Measurement) Determination, National Greenhouse Account Factors, and GHG Protocol. Where there is a method under the NGER Determination for calculating Scope 1 and Scope 2 emissions, that method must be followed.

NGER Determination options for calculating Scope 1 emissions include:

i. Method 1 – using default emissions factors derived from the latest version of the National Greenhouse Account Factors;

ii. Method 2 – a method using industry sampling and Australian or international standards listed in the NGER (Measurement) Determination or equivalent for analysis;

iii. Method 3 – a method using Australian or international standards listed in the NGER Determination or equivalent standards for both sampling and analysis of fuels and raw materials. Method 3 is very similar to method 2, but it requires compliance with Australian or equivalent documentary standards for sampling; and

iv. Method 4 – direct measurement using continuous or periodic emissions monitoring.

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(c) The NGER Determination also sets out a method for estimating Scope 2 emissions from the purchase of electricity from a network.

(d) Guidance on the calculation of Scope 3 emissions for limited categories of emissions sources is provided in the National Greenhouse Account Factors.

Further guidance may be found in chapters 5-7 of the GHG Protocol Scope 3 Standard, and in its companion document Guidance for Calculating Scope 3 Emissions.

(e) An organisation must assess the uncertainty associated with its estimates of direct (Scope 1) greenhouse gas emissions in accordance with the NGER (Measurement) Determination.

4.2.5 Emissions attributable to the organisation

(a) An organisation must apply the calculation approaches set out in 4.2.4(b) to calculate the greenhouse gas emissions attributable to emissions sources associated with the boundary determined under 4.2.1 during a specified period of time (e.g. a 12 month period).

(b) Collectively, the greenhouse gas emissions attributable to each emissions source will provide an estimate of the greenhouse gas emissions attributable to the organisation boundary during the specified period of time.

4.3 Carbon footprint calculation of a product

The following steps must be applied to calculate the carbon footprint of a product.

(a) Undertake a carbon life cycle assessment (LCA) using the guidance provided in sections 4.3.1 to 4.3.5 and in accordance with current international standards.

International standard ISO 14040:2006 and ISO14044:2006 provide guidance on how to undertake a LCA.

Other international standards based on the ISO 14040 series may also be applied including PAS2050:2011 and the GHG Product Life Cycle Accounting and Reporting Standard.

(b) An organisation must prepare a LCA report for its product, which contains the following components:

i. scope of the assessment, including the system boundary and all assumptions and exclusions;

ii. greenhouse gas emissions sources within the system boundary;

iii. greenhouse gas emission factors and calculation methodologies;

iv. life cycle inventory analysis;

v. a base year and details of the organisation’s base year re-calculation policy; and

vi. the greenhouse gas emissions calculated as attributable to the life cycle of the product.

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4.3.1 Defining the scope, including the system boundary

(a) The scope of the LCA report should include a description of:

i. the product and its function;

ii. the functional unit;

iii. all assumptions made in the LCA; and

iv. the measurable parameters and system boundary of the product over its entire life cycle.

The system boundary is best displayed as a flow chart (for example figure 2, ISO 14040:2006).

An organisation should incorporate all relevant stages of the life cycle of the product in the LCA system boundary. Any decision to exclude life cycle stages, processes, inputs or outputs must be clearly stated, and the reasons for and implications of their exclusion justified.

4.3.2 Setting a base year and base year re-calculation policy

Organisations must set a base year to allow for their product’s emissions to be accurately compared over time, consistent with the steps outlined under 4.2.2.

Chapter 14 of the GHG Protocol Product Standard provides additional guidance for product footprints: Setting Reduction Targets and Tracking Inventory Changes over Time.

4.3.3 Emissions sources within the system boundary

(a) An organisation must consider all sources of greenhouse gas emissions within the system boundary of the product, including the relevant stages of the product’s life cycle. These may include:

i. emissions resulting from the transformation, production, processing and acquisition of raw materials;

ii. emissions resulting from manufacture, production and final assembly;

iii. emissions resulting from the operation of premises;

iv. emissions resulting from all methods of transport;

v. emissions resulting from warehousing and sales;

vi. emissions resulting from services that form an integral part of distribution and supply;

vii. emissions resulting from the operation and maintenance of the product; and

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viii. emissions resulting from the reuse, recycling or final disposal of the product.

Any incidental emission sources may be estimated in line with the guidance provided in the NGER Reporting Regulations and NGER Determination. The NGER Determination specifies that such estimates should be transparent, comparable, accurate and complete.

(b) The LCA of an imported or exported product must accurately reflect its embodied emissions, including international freight and any other lifecycle stages.

(c) The LCA must cover emissions of the six greenhouse gas types included under the Kyoto Protocol.

4.3.4 Life cycle inventory analysis

(a) Life cycle inventory analysis should provide the following information:

i. data sources and collection procedures and calculation methodologies used to quantify the greenhouse gas emissions associated with inputs and outputs to the relevant life cycle stages of a product;

ii. reference units for all inputs and outputs for the relevant life cycle stages, for example, litre of fuel, unit of gas or electricity etc.;

iii. the chosen functional unit for the product, for example kilograms of CO2-e per unit of product ;

iv. what the data includes and whether start-up/shutdown and emergency conditions are included, i.e. what production delivery inputs are considered;

v. whether there are relevant local or regional variations associated with the calculated greenhouse gas emissions;

vi. the allocation of greenhouse gas emissions amongst products that share a production delivery platform;

vii. the period during which the information and data has been collected;

viii. the significance of possible exclusions and assumptions.

ix. information sources; and

x. any uncertainty associated with key parameters.

(b) An organisation must calculate the direct and indirect greenhouse gas emissions resulting from the emissions sources within the product system boundary. Guidance on calculating emissions is provided in the NGER (Measurement) Determination, National Greenhouse Account Factors and GHG Protocol.

(c) Where there is a method under the NGER Determination for calculating Scope 1 and Scope 2 emissions, that method must be followed.

(d) Scope 3 emissions should be calculated in line with the guidance provided in NGERS where it is reasonably practicable to do so.

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(e) An organisation must assess the uncertainty associated with its direct (Scope 1) greenhouse gas emissions estimates in accordance with the NGER Determination.

4.3.5 Emissions attributable to the life cycle of the product

(a) An organisation must apply the data collection and calculation approaches set out in the life cycle inventory analysis to calculate the greenhouse gas emissions attributable to each stage of the life cycle of the product. Results must be expressed in the chosen functional unit.

(b) Collectively, the greenhouse gas emissions attributable to each stage of the life cycle will provide an estimate of the emissions attributable to the full life cycle of the product.

4.4 Carbon footprint calculation of an event

The carbon footprint of an event may be calculated using the inventory approach (including relevant Scope 3 emissions) or the LCA approach.

Organisers seeking to calculate the carbon footprint of the event should prepare a greenhouse gas emissions inventory report or LCA report that contains the following components:

i. the event boundary;

ii. greenhouse gas emissions sources associated with the event boundary;

iii. greenhouse gas emissions factors and calculation methodology;

iv. activity and emissions data collected or inventory analysis;

v. assumptions used;

vi. all exclusions and their justification; and

vii. final calculated greenhouse gas emissions attributable to the event boundary.

The general processes set out under section 4.2 or 4.3 may be used as guidance.

4.4.1 Defining the boundary of an event

The boundary of an event defines the activities that the organiser should include in the carbon footprint calculations for the event. Emissions to be included are those that:

i. are under control or influence of the organiser;

ii. are owned or shared by the organiser;

iii. occur as a consequence of the event (associated emissions), where it is possible to reasonably estimate these emissions; and

iv. are of high stakeholder interest.

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The treatment of some associated emissions may vary subject to the nature of the event. In all cases, the event boundary chosen must be transparently documented and disclosed when making assertions relating to the achievement of carbon neutrality by the host in relation to the event.

4.4.2 Event baselines

For non recurring events, a reference case may be set against which potential emission reductions activities can be compared.

If the event is recurring and the intent is to compare emission reductions over time, the initial carbon footprint must form the baseline for future events. The baseline must be re-calculated where the nature or scale of the event has changed materially in between events.

5. ACHIEVING CARBON NEUTRALITY5.1 Emissions management plan

Organisations wishing to become carbon neutral must develop an Emissions Management Plan. The Emissions Management Plan must demonstrate that appropriate systems are in place to monitor and reduce the greenhouse gas emissions associated with the organisation, product or event, and to purchase and cancel eligible carbon offsets. An Emissions Management Plan must identify:

the greenhouse gas emissions attributable to the activities of an organisation (or specified part of an organisation), product or event within the reporting period;

an emissions reduction strategy including the emissions reduction measures to be undertaken and quantity of emissions to be reduced over a specified timeframe;

the equivalent quantity of carbon offsets required to offset the remaining emissions attributed to the product or organisation for each reporting period; and

how any changes in the greenhouse gas emissions attributable to the product, organisation or event will be identified and recorded.

Where emissions calculations change over time (e.g due to improvements in data or calculation methodologies), the organisation must re-calculate the emissions baseline and update the Emissions Management Plan. Emissions attributed to the organisation or product in previous reporting periods should also be revised.

5.2 Cancellation of eligible offsets

Organisations must voluntarily surrender and cancel in a registry the equivalent number of eligible units to offset the total emissions associated with the product, organisation (or specified part of an organisation), or event.

Carbon Units, Australian Carbon Credit Units or eligible international units surrendered to meet an entity’s liability under the carbon price mechanism do not reduce the entity’s carbon footprint.

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5.3 Reporting

A periodic report must be made publicly available on the entity’s website to communicate progress on emissions reduction activities and carbon offsetting of carbon neutral organisations products. Annual reporting keeps key stakeholders informed in an open and transparent manner and communicates your achievements in managing emissions. For events, one report is required at the conclusion of the event. The NCOS Carbon Neutral Program guidelines provide further details on reporting for events.

The periodic report for organisations and products must be made against an Emissions Management Plan and must include the following:

(a) The total carbon footprint of the activities of the organisation (or specified part of the organisation) or the product sold in the reporting period, including any actions taken to reduce total greenhouse gas emissions before offsetting;

(b) A statement on the emissions reduction activities undertaken in accordance with the emissions reduction strategy and the resulting quantity of emissions reduced;

(c) Records to prove that sufficient eligible offsets have been acquired to offset the proportion of the total carbon footprint associated with the activities of the organisation (or specified part of the organisation) or products committed to be offset; and

(d) Details of the quantity and type of offset units purchased and the register in which they have been cancelled.

5.4 Guidance on making carbon neutral claims

When making Carbon Neutral Claims in conjunction with this Standard, users must be mindful of their obligations under the Australian Consumer Law.

The Australian Consumer Law applies to all forms of marketing, including claims on packaging, labelling and in advertising and promotions across all mediums (print, TV, radio and internet).

Consumers are entitled to rely on any carbon neutral claims you make under this Standard and expect these claims to be truthful. Organisations must ensure that any claims made regarding compliance with this Standard are accurate and appropriately substantiated.

The Government has registered a certification trade mark which can be used under licence to market products, events and organisations as carbon neutral in compliance with the NCOS where those organisations are certified under the NCOS Carbon Neutral Program.

6. AUDITA robust and transparent audit model provides confidence in carbon neutral claims. Independent audit validates the accuracy and completeness of carbon footprint calculations including the adequacy of emissions methodologies and factors other than those referred to in this Standard.

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Audit standards that must be applied are:

ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information; or

ISO 14064-3:2006 Greenhouse gas specification with guidance for the validation and verification of greenhouse gas assertions,

in conjunction with the relevant carbon footprinting standard. If another auditing standard is to be applied the auditor must confirm that it as demanding as those specified.

An auditor must provide an assurance statement confirming whether the carbon footprint calculations are presented fairly in accordance with the requirements of this Standard. The expected level of assurance to be achieved is that of a reasonable level. However, Scope 3 emissions are only required to be audited to a limited level of assurance.

Audits of carbon footprint calculations required under the Standard must be undertaken by a suitably qualified auditor. Suitably qualified auditors are individuals or bodies that:

(a) Are registered under the National Greenhouse and Energy Reporting audit framework established by the Department of Climate Change and Energy Efficiency for the NGER Act; or

(b) Are accredited to the international standard ISO 14065:2007 or recognised international standards based on ISO 14040.

Where specialist skills are required that are not possessed by the auditor, the necessary skills can be provided by an independent expert (in line with AS ISO 14064.3 or NGER Audit Handbook). Such experts must be independent and cannot have been involved in the development of the inventory or LCA that is the subject of the audit.

Once carbon neutrality is achieved for an organisation or product, emissions reductions and offsetting activities must be reported and independently audited on a regular basis. Organisations must undertake an audit at least once every two years to support a claim that an organisation or product is carbon neutral. Audited progress reports must be made publicly available.

Organisations making carbon neutral claims are responsible for maintaining appropriate records, having activities independently audited and bearing the associated costs.

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Use the guidance templates to prepare a:carbon footprintemissions management plan public disclosure summary (PDS)

Prepare an application package

Have the pack independently audited

Once the application package has been audited:sign the Administration Agreement and trade mark licencepay an annual certification fee

Certification

Submit your application package and then:receive your certification and trade markconsider early purchase and cancellation of offsets

Ongoing certification - managing emissions and reporting

)Purchase and cancel offsetsSubmit annual reportPay annual feeAudit every second year

Certification remains valid for five years provided you meet the management and reporting obligations

Figure 1: NCOS Carbon Neutral Program certification process

APPENDIX C – CARBON NEUTRAL PROGRAM STAGES

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